Electric-Car Maker Faraday Future’s Financial Lifeline Delayed
Faraday Future, the electric-car maker founded by entrepreneur and blacklisted debtor Jia Yueting, has hit another bump in the road, as the partner in its proposed car-production joint venture has failed to come up with $200 million in investment by the scheduled date.
In March, Chinese online gaming company The9 Ltd. signed a deal with the U.S.-based carmaker, in which The9 agreed to invest up to $600 million in a 50-50 electric vehicle joint venture. Faraday said it will use the money to produce its latest V9 electric vehicle model starting in 2020, with a planned eventual annual production capacity of 300,000 cars.
Nasdaq-listed The9 planned to complete the $600 million investment in three $200 million installments, with the first $200 million originally scheduled to be paid by Monday, according to the company’s March filing to the U.S. securities watchdog.
However, the joint venture has not yet come to fruition, according to publically available company registration data.
In a filing to the U.S. regulator on Monday, The9 said the first $200 million will be divided into two payments. An undisclosed portion of the $200 million is set to be paid by Aug. 6, and the rest will be paid at some undisclosed point in the future.
The9 didn’t disclose the reason why it is postponing the investment, but meeting the $600 million commitment will pose a huge financial burden to the money-losing online game operator. The9 announced in its filing that it aims to raise around $50 million by selling shares on the Nasdaq and will raise the remaining $150 million through private placements and borrowing.
Founded in 1998, the company was one of the earliest online gaming firms in China. The company’s business has stagnated since it ended a five-year partnership with Blizzard to exclusively operate the hit title “World of Warcraft” in 2009. Since then, The9 has looked for new revenue streams outside its core gaming business.
The9 reported a loss of 258 million yuan ($37.6 million) in 2018, up from 175 million yuan the year before. Its cash holdings fell from 142.6 million yuan at the end of 2017 to 4.3 million yuan as of Dec. 31, due to development costs and marketing expenses, according to the filing.
The U.S.-based Faraday Future is an electric car startup controlled by debt-ridden Chinese entrepreneur Jia. He has stayed away from China after LeEco, the technology company he founded, was saddled with billions of dollars of debt, despite the country’s securities’ regulator asking him to return and “fulfill his duties.”
Due to this, Jia has been barred indefinitely from traveling via train and air in China since mid-2018 after being listed as a debt defaulter in 2017.
Faraday confirmed to Caixin media reports that a “majority” of its employees on unpaid leave — hundreds in total — have resigned recently. It also said the company has launched a new round of layoffs a few days ago, but refused to divulge details.
Faraday’s U.S. workforce has shrunk to 350 from over 1,000 last year, according to a source familiar with the matter. Faraday said it had had a global headcount of nearly 2,000 as of the end of 2018.
In November, a person working with Faraday’s U.S. research and development team told Caixin that the company’s 1,300 U.S. employees were owed $1.63 million in back wages.
Jia Yueting was embroiled in a months-long dispute over control of Faraday Future with real estate giant Evergrande Group, as their partnership went sour and seized media attention for much of last year.
Contact reporter Tang Ziyi (firstname.lastname@example.org)
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